New Momentum for the Fight Against Late Commercial Payments in Spain

3 November 2022 - César Gárcia de Quevedo Puerta

Spanish Law 18/2022, of 28 September, on the incorporation and expansion of companies – also known as “Crea y Crece” (Create and Grow) – which forms part of Spain’s “Recovery, Transformation and Resilience Plan”, was published on 29 September and its Chapter IV includes measures to combat late commercial payments.

Despite the years that have passed since 29 December 2004, when a scheme to combat late payment in business transactions was established in Law 3/2004, excessive delays still continue to occur and it is smaller companies that suffer the most from non-compliance with payment deadlines. Being financially stronger, large companies, i.e., those with a turnover of more than 8 million euros per year, have higher rates of delinquency and longer payment periods, according to the explanatory memorandum of Crea y Crece.

The pernicious effect of late payment is evident, as affected companies have to compensate for the financial cost and the uncertainty generated by these bad practices by sacrificing projects and investment capacities.

The corrective measures set out in the new law are:

  1. Promoting transparency by making payment periods for commercial transactions public; to this end, a governmental monitoring centre on private-sector delinquency will be created to oversee the evolution of payment data and promote good practices in this area.
  2. Incentivising compliance with payment deadlines, both by making it a criterion for access to public subsidies and by strengthening public procurement rules to ensure that contract awardees pay their subcontractors on time.
  3. Making electronic invoicing compulsory. “Large” companies will have a period of one year to adapt and there will be two years for smaller businesses, which will also have significant subsidies to make it possible for them to switch to digital accounting. Electronic invoicing will make it easier to control the date of payment and to determine companies’ average payment periods.

How these measures will play out in actuality depends to a large extent on their regulatory development, in particular on when electronic invoicing will become mandatory. Notwithstanding the results of this development, there is a conspicuous lack of any provisions for penalties. This will no doubt continue to make it attractive for some companies to delay payments, thereby disrupting commerce in general.